Is Cronos Group Stock a Good Long-Term Investment?

 cronos group stoc
iStock.com/Adrian Bysiak

Is CRON Stock Good for the Long Term?

Few companies have been such a consistent generator of buzz like Cronos Group Inc. (NASDAQ:CRON). Between being the first Canadian company to attain a U.S. Nasdaq listing and its joint venture with MedMen Enterprises, CRON stock has been on a roll. But when it comes to the Cronos stock forecast, can it keep the good times going? Despite being skeptical at first, I’m now a firm believer that the future of Cronos Group stock does indeed look bright.

When I first began taking an in-depth look at Cronos, I didn’t see much that separated it from the pack. You’ll see evidence of this in my earlier writing on CRON stock.

But with the recent Cronos-MedMen joint venture and the foresight demonstrated by the company with its move to the Nasdaq, I can say that they have made a convert out of me.

Cronos is a Canadian marijuana stock with a strong outlook toward international expansion, as demonstrated by the MedMen deal and the Nasdaq listing.

Advertisement

This pivot toward international markets is what is going to separate a good marijuana stock from a great marijuana stock, especially in the post-Canadian recreational marijuana world.

While Canadian marijuana stocks are flying high as that legalization date approaches—and I imagine the correction the industry is experiencing will see a swift turnaround when we do edge toward legalization—the companies with true long-term potential will pivot toward new markets rather than rest on their laurels.

Chart courtesy of StockCharts.com

The Nasdaq listing was the company’s first step toward that international strategy.

By being the first Canadian marijuana stock on the prominent exchange, it made it a juicy target for U.S. investors.

Buyers afraid of marijuana stocks due to U.S. laws prohibiting the drug, wary of Canadian exchanges that they are unfamiliar with, or unsure about buying over-the-counter shares could all breathe a sigh of relief as a strong marijuana company landed on the reputable Nasdaq.

Cautious investors now had an in to the marijuana market that they could be absolutely sure was legitimate due to its presence on the Nasdaq.

That savvy move netted the company a huge immediate boost to the stock, sending shares up 30%. The company gave some of those gains back over the next few weeks, but overall, it performed exceedingly well, especially considering that many other companies in the marijuana market are still reeling from the correction that followed 2017’s wild late-year gains.

The next move of note is the MedMen deal. MedMen is one of the largest cannabis retailers in California, with operations in the “Golden State,” as well as Nevada and New York.

Cronos and MedMen announced a cross-border partnership that would link the U.S. company with Cronos.

MedMen, one of the largest cannabis retailers in California, has facilities in California, Nevada, and New York. In January, MedMen announced plans to list on the Canadian Securities Exchange as soon as April 15. (Source: “US cannabis companies look to Canada when going public,” CNBC, January 24, 2018.)

“We want to change the perception of cannabis worldwide, and bring it to the mainstream,” said Cronos Group CEO Mike Gorenstein. “It was really clear MedMen offered, by far, the best retail experience. We wanted to make sure we could bring that to Canada.” (Source: “Cronos Group finishes the day up 11 percent after announcing MedMen partnership,” CNBC, March 19, 2018.)

The two will join together to create MedMen Canada, a joint venture that will develop new products and open stores across Canada, hoping to combine Cronos’s access to the Canadian market with MedMen’s expertise on branding, technology, and retail experience.

“MedMen Canada will give us entry into an important emerging market for adult use and broaden our exposure worldwide,” said MedMen CEO and co-founder Adam Bierman. (Source: “Cannabis Giants Join Forces in Cross Border Venture,” Cision, March 19, 2018.)

“We always take a very disciplined and focused approach to our growth, and it was important that we find the right partner for our expansion into Canada,” he added. “Cronos has been a leader in the Canadian medical cannabis space, and their international track record makes them the perfect partner. They have the right infrastructure and expertise to successfully execute this venture.”

This is a great move by both companies for a variety of reasons, but the main draw for me is that it shows that both companies are treating the cannabis industry as they should: an international market.

Focusing on only Canada or the U.S., or really any other singular marijuana market, is myopic and shows a lack of vision, in my opinion. This is a global industry that is only gaining more and more traction in countries across the world. Cronos seems to understand that, and that’s why CRON stock has been on such a tear lately.

MedMen, for its part, is hoping to list on the Canadian Securities Exchange as soon as April 15, making it public for the first time.

Both companies have made strong inroads into new markets, which is exactly the type of move you want to see out of marijuana companies, especially in this high-speed growth period.

Cronos has even gone on to say that it is looking at this as a long-term partnership, potentially opening it up to expansion into the U.S. market down the line. That would be another coup for Cronos Group stock and only makes the CRON stock forecast that much brighter.

Cronos Stock Forecast

Cronos Group stock has already been one of the strongest performers in 2018, and at this point, I don’t see that slowing down.

The company has made a bevy of intelligent moves so far this year, and if it keeps this up, I see the stock continuing to surge. The MedMen deal alone shot share value up by 11%, and the other aspects of the company are equally impressive.

Currently, Cronos maintains operations in Australia, Germany, and Israel in addition to Canada.

Cronos Australia, in particular, was a big win for the company when it formed a joint venture with NewSouthern Capital Pty Ltd. in February. This deal gives the company not only an opening to the Australian market, but New Zealand and Southeast Asia as well. (Source: “Cronos Group Announces Launch of Cronos Australia with Grant of Two Licenses,” Cision, February 5, 2018.)

The production capacity of the company’s main asset, Peace Naturals, is 7,000 kilograms within a 70,000-square-foot facility.

By 2019, the company projects that it will be able to produce 40,000 kilograms following an expansion set to take place in 2018.

Should the company keep the string of wins going, alongside the expected bump from the Canadian legalization, I believe that a 50% boost to the company’s stock by the end of the summer is not outside the realm of possibility.

Analyst Take

CRON stock has demonstrated itself to be a winner so far in 2018.

The philosophy behind the moves that Cronos Group is making is exactly what I like to see out of a marijuana company. As such, I believe that big things may be ahead when you look at the Cronos stock forecast.